Good morning, Hillary. I just wanted to check in and have a little chat with you today. I have a question for you.
Alright. So I was reading an article the other day and it mentioned the term “investor fatigue”, and I thought of two things. One, I have not heard of that term before, and boy do I think we all have it.
I thought we could just chat for a minute about investor fatigue. What is it? Why do we have it? What are your thoughts about that?
Yeah, investor fatigue is something that I think a lot of clients and investors have had for a while now – I have as well as a portfolio manager! – it’s really a period of time in which the markets just continue to really go nowhere. We are currently in a very long bear market, not in terms of the severity of the decline like we saw during the 2008 financial crisis or during the Covid 19 pandemic related selloff, but really just a very long-term sideways market.
It’s been about two years now where most asset classes are still either lower than they were two years ago or just about even. And so it feels like we’re not making any progress and this is the time period when some investors can start to doubt whether or not investing will actually be fruitful in the future.
So they’re just kind of saying, what is happening? I’ve had my money invested and I don’t feel like I’m going anywhere. So what do you say to us, Hillary? What kind of thoughts do you have? Maybe a little hope for the future, but what kind of advice do you give someone when they have investor fatigue?
Yeah. Well, it’s something that has happened before. So you may remember during the early 2000s, it was called the lost decade for investing, where people felt like over a 10 year period things just weren’t going anywhere.
But right after that, the market took off and we had a really robust series of returns for the next 10 to 15 years. And so this isn’t something that’s new to the markets, it happens from time to time. Right now what we’re seeing is we’ve had the sideways markets because it’s really coincided with the rising interest rate environment.
The Federal Reserve had to raise interest rates very quickly over a short period of time to reign an inflation, and that caused a sell off both in stocks and bonds, which is atypical. But looking ahead, we do have optimism because you’re getting yields right now in the bond market that are better than we’ve seen for more than a decade, and the starting yield for fixed income is highly correlated with future returns.
Right now we’re seeing within the fixed income asset classes, about 5% to 9% yields across the fixed income market. We’re seeing the economy still being very robust in terms of still generating that slow and steady growth, inflation has been coming down. All of those things are positive for both stocks and bonds.
And so while this is a period of time that’s been difficult as investors and difficult for me as well as a portfolio manager looking ahead, which is what we should always be doing when investing, we see a lot of value right now across many different asset classes.
Okay. So your advice is stay the course?
Because this has happened before. We’re expect it from time to time and if I could just throw one thing in, even though we have this knowledge, sometimes it’s just really hard to go through these times. So if you have a financial advisor, reach out to them, have a conversation, they would always prefer you to do that, then to just be worrying on your own. So if you have that resource, reach out and use it. Okay. Thanks for your time today, Hillary. This was great.